Xbox is undergoing a substantial restructuring, which includes the divestment of four studios and the elimination of approximately 20% of its workforce over the next 12 months. This broad overhaul affects around 3,200 employees, with only 350 of those positions directly linked to the studios being moved out of Microsoft's direct ownership.
Double Fine and Compulsion Games are set to become independent entities once more, supported by initial funding from Microsoft, and will retain their intellectual property. Undead Labs and Ninja Theory have been sold to undisclosed new owners. The future of Arkane Studios is also uncertain as it undergoes a review of its strategic options.
Details regarding the impact of these layoffs on the remaining studios under the Xbox umbrella are still emerging. While new Xbox CEO Asha Sharma indicated that the size of cuts will vary across teams, she confirmed that no games currently in development by these studios have been canceled. This restructuring signals a strategic realignment for Xbox, with a renewed focus on key franchises and studios.
The acquisition of Activision Blizzard for $75 billion in 2023 positions it as a central pillar of Xbox's future strategy. The Activision side of the business will continue to focus heavily on the Call of Duty series, with studios like Infinity Ward, Raven Software, Treyarch, and Sledgehammer Games working on installments. Call of Duty: Modern Warfare 4 is slated for release on October 23, and unlike some previous titles, it will not be a day-one release on Xbox Game Pass.
Blizzard Entertainment's internal situation following the layoffs remains unclear, although Sharma's memo suggests the publisher will see workforce reductions. Blizzard is currently managing multiple major franchises, including Overwatch, World of Warcraft, Hearthstone, and Diablo. The company is still scheduled to hold its convention, BlizzCon, from September 12-13, which is expected to provide further clarity on its future direction.
King, the developer of Candy Crush, will now report directly to Sharma, similar to Mojang Studios. This elevated position suggests King will play a significant role in Xbox's future plans, with Sharma noting that these studios serve as platforms and contribute significant demographic and differentiation to Xbox.
Bethesda Game Studios will also experience changes. Arkane Studios operates under Bethesda, meaning it will be among the studios divested if its sale or closure proceeds. Reports from Bloomberg indicate that Id Software, known for Doom, and ZeniMax Online Studios, the developer of Elder Scrolls Online, have both experienced significant staff reductions. However, there has been no official word on layoffs affecting MachineGames, the Wolfenstein developer, or Bethesda Game Studios, the studio behind Starfield. The confirmation that no games have been canceled suggests The Elder Scrolls 6 remains in development.
Within the core Xbox Game Studios portfolio, the company is concentrating its efforts on specific franchises. The Coalition will continue to develop the Gears of War series, with Gears of War: E-Day expected to be a major holiday release and an Xbox Series X exclusive on October 6.
The Halo franchise also remains a priority, with Halo Studios working on Halo: Campaign Evolved, a remake of the original game, scheduled for release on July 28. Rumors of a canceled multiplayer project codenamed Project Ekur have not yet been officially confirmed by Xbox.
Mojang Studios, responsible for Minecraft, is also slated to become a major focus. The next installment, Minecraft Dungeons 2, is set to launch on September 29. Mojang's vice president, Helen Chiang, has also taken on the newly created role of Xbox's first chief operating officer as part of this shakeup.
Obsidian Entertainment, despite earlier unconfirmed reports of potential closure, will remain open under Xbox Game Studios. While currently focused on updates for Grounded 2, the studio's future projects are not yet public. Given Obsidian's history with Fallout: New Vegas, there is speculation it could be involved in a new Fallout title.
Playground Games continues its work with Xbox, having recently released Forza Horizon 6 and preparing for the launch of Fable next year. Playground Games is now the sole remaining studio from Xbox's 2018 expansion of its publishing initiatives, which at the time included Compulsion Games, Undead Labs, and Ninja Theory. The Initiative, established in 2018, was later shut down while developing a Perfect Dark reboot.
Turn 10 Studios, the developer of the Forza Motorsport series, will also remain with Xbox. However, the studio previously experienced a significant layoff in 2025, resulting in the departure of 70 employees and a pivot from the Motorsport series to support Playground Games on Forza Horizon.